Today’s vote on Clive Efford’s NHS Bill is a vivid symbol of how Labour’s thinking on public services has changed in opposition. When the party lost power it turned its back on Blair-era public service reform and its former belief in market forces for public services. The party is now opposed to the excesses of the coalition’s “open public services” agenda, which is exemplified by the principle of “any qualified provider” in the NHS that the Efford Bill would overturn.
But Labour has been much better at saying what it is against than either explaining why, or saying what it wants instead. So alongside its campaigning zeal, the party needs a new analysis that explains when and why markets are bad for public services, and what the alternatives should look like. This is especially important because few within Labour argue that the state should be the only provider of every public service. So the party must champion a coherent middle way, which deals with the failures of markets and places the leadership of public services in the hands of organisations dedicated to the public interest, in whatever sector they sit.
Public service markets were supposed to deliver value for money, innovation and new capacity. But the failures of private providers are now all too obvious, from contractual fraud by a huge PLC to the dereliction of duty of local care agencies charged with protecting vulnerable pensioners. The problems are structural, not just the fault of individual companies. Markets too often lead to a narrow focus on specified, measurable results where services ‘hit the target but miss the point’. Elements of a service which are hard to specify or measure get side-lined and companies start to ‘game’ the system and discriminate against harder to help service users.
Markets also make it hard to look at the big picture. Where a contract is time limited, there is a short term perspective; but services should be delivered by enduring institutions with a stake in the community, who are focused on stopping problems from arising. Meanwhile the fragmentation and competition of market relationships undermines the potential for collaboration between organisations with overlapping goals, Andy Burnham’s main critique of the NHS reforms.
Rampant competition can harm public bodies and non-profit agencies as much as companies, if they are forced to compete aggressively with each other. Non-profit organisations often say they would prefer long-term strategic relationships with commissioners, where needs and solutions are identified in collaboration, rather than narrow commercial relationships.
But the involvement of for-profit companies pose particularly difficulties and that’s why they are excluded from providing schools, social housing and adoption services. Companies will always struggle to hard-wire the public interest into their DNA. They have a competing commitment to generate profit for shareholders; their default is commercial confidentiality rather than openness; and their legal accountability to shareholders and commissioners is a major obstacle to creating control and ownership for everyone with a stake in a service.
That’s why Labour should consider whether there are other sectors where companies should be excluded from being the prime provider, including large-scale NHS services. Business could still play a supporting role in the supply-chain, like the firms that delivered Transport for London’s superb Oyster card technology. But commercial providers should be banned from running whole public service systems like the Work Programme or probation.
However, a presumption against excessive commercial involvement must not mean sclerotic public bureaucracies however. Labour must learn from past mistakes by public as well as private sector agencies to define its new middle way, where providers come in many shapes and forms but all are truly dedicated to the public interest.
A new Fabian Society report identifies the qualities that should define these public interest institutions, from whatever sector they come. Their public character starts with having broad goals – to help people really thrive and to serve society at large – and strong values like a commitment to equality, dignity, probity and transparency. It means having equal, empowering relationships with both service users and with employees; and also being focused on the long-term as an enduring, rooted institution, working in collaboration with local partners. Finally, public interest institutions must set their own direction in the context of genuine ownership by all their stakeholders – citizens, employees, partners and politicians.
Together this describes the strong public character our services need which markets can never secure. The forces of competition are either irrelevant or counter-productive to both the ends and the means of the public sphere.
Andrew Harrop is general secretary of the Fabian Society. The Fabian Society’s report Going Public was published in November.
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